Discussion in 'Options' started by Chuck Krug, Aug 4, 2011.

  1. short ES sep @1250
    long es dec @1245

    short sep 1255 put @37
    short dec 1240 call @65

    rationale: selling options and profiting from deflating time value

    will do more calculation which series to sell to have the maximum profit from time value and volatility

    any suggestions are more than welcome
  2. 1 of the problems is obvious right now
    as the put or call moves more in to the money, the 1 leg appreciates faster than the other
    which is the case of the put at the moment
  3. MTE


    Short sep futures+short sep 1255 put=short sep 1255 call.
    Long dec futures+short dec 1240 call=short dec 1240 put.

    So, your position reduces to a "calendarized short strangle".
  4. a covered calendarized short strangle
  5. maybe the same strikes is better on the p/l
  6. looking to profit through loss of timevalue and decrease of volatility
  7. MTE


    No, it's a naked short strangle.
  8. how can it be naked?
    the short put is covered by the short fut
    and the short call is covered by the long fut
  9. MTE


    The resulting position I have mentioned is a synthetic position.

    Your 4 positions synthetically reduce to 2 naked short option positions.

    In other words, instead of trading this:

    short ES sep @1250
    long es dec @1245
    short sep 1255 put @37
    short dec 1240 call @65

    You can trade the following:

    short sep 1255 call
    short dec 1240 put

    and achieve the same position.
  10. but if i were to be short the dec 1240 put
    straight out
    and say a bomb would explode and the sp would trade at 600, my losses would be enormous
    were as now, i am short the fut contract
    #10     Aug 4, 2011